Deforestation and Seigniorage in Developing Countries:Better Environment or Lower Inflation?
Pascale COMBES MOTEL
The forest covers an important share of land area in many developing countries and represents an important source of revenue for governments. The other major contribution to government revenues comes from printing money, namely the seigniorage. Using a simple theoretical model, we show that tighter monetary policies exert a positive effect on deforestation rates. Consequently, there exists a substitution effect between deforestation rates and seigniorage. Empirical evidence for a panel of countries seems to support our theoretical conclusion. This finding sheds some new light on policies that limit seigniorage revenues, as for example IMF's low-inflation recommendations.
Panel Data Analysis, deforestation, developing countries, inflation, seigniorage
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